Reducing Culture Clashes in a Small Firm Merger
Debra L. Bruce, JD, PCC.
“We’re thinking about combining our firm of three lawyers with another small law firm. Do you have any guidance for us on what to consider in making our decision?” Clients ask me questions like this more frequently these days.
In some cases, a booming law practice has rainmakers looking for experienced help. Some senior lawyers in solo and small firms consider mergers as they begin thinking about succession planning. Sometimes young lawyers with developing practices seek to cut per capita overhead by spreading fixed costs across more fee earners. For some small firms, the merger mania in BigLaw has stimulated them to consider their options.
When contemplating a merger, many risks and rewards must be considered and due diligence investigations should be conducted. Culture clashes undermine mergers more frequently than any other factor, however.
When there are only 5 lawyers in the whole office, common values become even more critical. There is nowhere to hide. Variances in strongly held beliefs and values tend to grow from cracks to chasms. They can threaten the productivity, health and work satisfaction of everyone in the office, as well as the success of the firm as a whole.
Fortunately, with fewer people involved in a small firm, it can be a little easier to identify and discuss issues that may develop into rifts in a law firm partnership. Here are a few subjects to discuss.
1. What is your attitude toward money and the firm’s fiscal policy? Do you advocate leveraging debt to help the firm advance quickly and to weather dry spells? Or do you prefer a more conservative pay-as-you-go approach, relying on partners for any bridge loans required during slower periods?
2. How do you like to use technology? Are you quick to adapt and experiment with new software, hardware and mobile apps, always looking for ways to increase productivity and flexibility? Or do you believe that most new technology products waste more time and expense in the learning curve than the benefits they bring? Do you prefer to stick to what has worked for you in the past until others have vetted a product to the point that it has become mainstream?
3. What is your attitude toward the practice of law? Are you a hard-driving lover of the law, who will choose to practice as long as you can get to your desk? Or are you a person of many interests, who needs the time and opportunity to explore them while also enjoying a law practice? Do you believe in a little laughter and fun while you work, or do you think people like that are just goofing off and not serious about their careers?
4. Do you lean more toward competition or collaboration? Would you prefer to collaborate with opposing counsel to find win-win solutions for clients’ problems and disputes? Or do you think that’s for unrealistic dreamers? Do you get a charge out of going into battle and love the high of victory?
5. How should young lawyers develop into assets for the firm? Do you think the real go-getters will emulate the experienced attorneys and take initiative for their own development, asking for help when they need it? Or do you think the firm should invest time and money in training and mentoring young lawyers so they will develop more quickly with the right skills?
6. What is your attitude toward staff? Do you see them as facilitators whose goal should be to help the fee earners focus as much time as possible on billable activity? Or do you see them as teammates with complementary skills and talents in producing a joint product?
7. What kind of supervision does staff need? Do you review their work carefully to make sure there are no mistakes? Or do you delegate to them and expect them to take it from there, unless they have questions? Who should staff report to? The respective attorneys they work with, or an administrative supervisor?
8. What are you willing to spend firm resources on? Should attorneys have individual budgets for marketing, business development and other discretionary costs, or should expenditures be managed on an ad hoc basis? Will the firm pay for club memberships, season tickets for sporting or cultural events, hunting leases, bar dues, out-of-town CLE conferences, partner retreats, management consultants, charitable contributions, office décor, iPads, smart phones or other personal technology?
9. How do you think profits should be allocated? What efforts on behalf of the firm should be rewarded handsomely with bonuses or profit distributions? The biggest rainmakers? Those who work the hardest billing and collecting fees? Attorneys who invest their time in keeping the firm running smoothly and overseeing administrative matters? Attorneys who train and mentor associates or staff? Should profits be distributed according to an objective formula, or should there be any subjective elements to distributions? Who should make decisions about any subjective elements?
10. How should non-partner remuneration be handled? Should associates and staff receive bonuses? If so, should they be lock-step or merit based? If merit-based, what should the criteria be? Who should make decisions regarding bonuses and raises?
11. What hiring criteria are important for partners and associates? How important are grades, credentials and pedigrees? Will the firm hire new law grads, or let some other firm invest in their initial training so you can scoop up experienced associates when they tire of the bigger firm environment? Will the firm bring in lateral partners or should even experienced attorneys have to get through a probationary period? If so, must they have business, or just needed expertise?
12. How should a lawyer become a partner? Will there be a capital account buy-in? Will the firm finance it? How long must a lawyer be at the firm or be out of law school before becoming a partner? Will there be an announced policy, or will it be handled on an ad hoc basis? What are the partnership criteria? Who will make the partnership decision? How will the resulting dilutions of partnership interests be allocated when a new partner joins?
These are just a few of the issues that typically spawn conflict in a small law firm. Don’t expect to find partners who will align with you on every issue. Indeed, that could actually be harmful to the firm, because it could make it susceptible to “group think,” which creates unwarranted complacency or limits the law firm’s options.
You can use this list for discussions to ferret out strong disagreements on issues important to you. To help gauge the level of significance each person puts on an issue, consider couching views in terms of a 1 to 5 scale. Despite your best efforts in advance, controversies will inevitably arise. If the partners align on their most fundamental values, however, perhaps the conflicts will occur on smaller issues where compromise will come more easily.
Post by Debra L. Bruce reprinted with permission from the April 12, 2012, issue of The Legal Intelligencer. (c) 2012 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.